UNIVERSAL FOOD CORPORATION VS.

CA
33 SCRA 1
FACTS:
This is a petition for certiorari by the UFC against the CA
decision of February 13, 1968 declaring the BILL OF ASSIGNMENT
rescinded, ordering UFC to return to Magdalo Francisco his Mafran
sauce trademark and to pay his monthly salary of P300.00 from Dec. 1,
1960 until the return to him of said trademark and formula.
In 1938, plaintiff Magdalo V. Francisco, Sr. discovered a formula
for the manufacture of a food seasoning (sauce) derived from banana
fruits popularly known as MAFRAN sauce. It was used commercially
since 1942, and in the same year plaintiff registered his trademark in
his name as owner and inventor with the Bureau of Patents. However,
due to lack of sufficient capital to finance the expansion of the
business, in 1960, said plaintiff secured the financial assistance of Tirso
T. Reyes who, after a series of negotiations, formed with others
defendant Universal Food Corporation eventually leading to the
execution on May 11, 1960 of the aforequoted "Bill of Assignment"
(Exhibit A or 1).
On May 31, 1960, Magdalo Francisco entered into contract with
UFC stipulating among other things that he be the Chief Chemist and
Second Vice-President of UFC and shall have absolute control and
supervision over the laboratory assistants and personnel and in the
purchase and safekeeping of the chemicals used in the preparation of
said Mafran sauce and that said positions are permanent in nature.
In line with the terms and conditions of the Bill of Assignment,
Magdalo Francisco was appointed Chief Chemist with a salary of
P300.00 a month. Magdalo Francisco kept the formula of the Mafran
sauce secret to himself. Thereafter, however, due to the alleged
scarcity and high prices of raw materials, on November 28, 1960,
Secretary-Treasurer Ciriaco L. de Guzman of UFC issued a
Memorandum duly approved by the President and General Manager
Tirso T. Reyes that only Supervisor Ricardo Francisco should be
retained in the factory and that the salary of plaintiff Magdalo V.
Francisco, Sr., should be stopped for the time being until the
corporation should resume its operation. On December 3, 1960,
President and General Manager Tirso T. Reyes, issued a memorandum
to Victoriano Francisco ordering him to report to the factory and
produce "Mafran Sauce" at the rate of not less than 100 cases a day so

as to cope with the orders of the corporation's various distributors and

dealers, and with instructions to take only the necessary daily
employees without employing permanent employees. Again, on
December 6, 1961, another memorandum was issued by the same
President and General Manager instructing the Assistant Chief Chemist
Ricardo Francisco, to recall all daily employees who are connected in
the production of Mafran Sauce and also some additional daily
employees for the production of Porky Pops. On December 29, 1960,
another memorandum was issued by the President and General
Manager instructing Ricardo Francisco, as Chief Chemist, and Porfirio
Zarraga, as Acting Superintendent, to produce Mafran Sauce and Porky
Pops in full swing starting January 2, 1961 with further instructions to
hire daily laborers in order to cope with the full blast operation.
Magdalo V. Francisco, Sr. received his salary as Chief Chemist in the
amount of P300.00 a month only until his services were terminated on
November 30, 1960. On January 9 and 16, 1961, UFC, acting thru its
President and General Manager, authorized Porfirio Zarraga and Paula
de Bacula to look for a buyer of the corporation including its
trademarks, formula and assets at a price of not less than
P300,000.00. Due to these successive memoranda, without plaintiff
Magdalo V. Francisco, Sr. being recalled back to work, he filed the
present action on February 14, 1961. Then in a letter dated March 20,
1961, UFC requested said plaintiff to report for duty, but the latter
declined the request because the present action was already filed in
court.
ISSUES:
1.
Was the Bill of Assignment really one that involves transfer of
the formula for Mafran sauce itself?
2.
Was petitioners contention that Magdalo Francisco is not
entitled to rescission valid?

RULING:
1. No. Certain provisions of the bill would lead one to believe that
the formula itself was transferred. To quote, the respondent
patentee "assign, transfer and convey all its property rights and
interest over said Mafran trademark and formula for MAFRAN SAUCE
unto the Party of the Second Part," and the last paragraph states that
such "assignment, transfer and conveyance is absolute and irrevocable
(and) in no case shall the PARTY OF THE First Part ask, demand or sue
for the surrender of its rights and interest over said MAFRAN trademark

and mafran formula."

However, a perceptive analysis of the entire instrument and
the language employed thereinwould lead one to the conclusion that
what was actually ceded and transferred was only the use of the
Mafran sauce formula. This was the precise intention of the parties.
The SC had the following reasons to back up the above
conclusion. First, royalty was paid by UFC to Magdalo
Francisco. Second, the formula of said Mafran sauce was never
disclosed to anybody else. Third, the Bill acknowledged the fact that
upon dissolution of said Corporation, the patentee rights and interests
of said trademark shall automatically revert back to Magdalo
Francisco. Fourth, paragraph 3 of the Bill declared only the transfer of
the use of the Mafran sauce and not the formula itself which was
admitted by UFC in its answer. Fifth, the facts of the case undeniably
show that what was transferred was only the use. Finally, our Civil
Code allows only the least transmission of right, hence, what better
way is there to show the least transmission of right of the transfer of
the use of the transfer of the formula itself.
2. No. Petitioners contention that Magdalo Franciscos petition for
rescission should be denied because under Article 1383 of the Civil
Code of the Philippines rescission can not be demanded except when
the party suffering damage has no other legal means to obtain
reparation, was of no merit because it is predicated on a failure to
distinguish between a rescission for breach of contract under Article
1191 of the Civil Code and a rescission by reason of lesion or economic
prejudice, under Article 1381, et seq. This was a case of reciprocal
obligation. Article 1191 may be scanned without disclosing anywhere
that the action for rescission thereunder was subordinated to anything
other than the culpable breach of his obligations by the
defendant. Hence, the reparation of damages for the breach was
purely secondary. Simply put, unlike Art. 1383, Art. 1191 allows both
the rescission and the payment for damages. Rescission is not given
to the party as a last resort, hence, it is not subsidiary in nature.
UNIVERSITY OF THE PHILIPPINES VS. DE LOS ANGELES
35 SCRA 102

FACTS:

On November 2, 1960, UP and ALUMCO entered into a logging

agreement whereby the latter was granted exclusive authority to cut,
collect and remove timber from the Land Grant for a period starting
from the date of agreement to December 31, 1965, extendible for a
period of 5 years by mutual agreement.
On December 8, 1964, ALUMCO incurred an unpaid account of
P219,362.94. Despite repeated demands, ALUMCO still failed to pay, so
UP sent a notice to rescind the logging agreement. On the other hand,
ALUMCO executed an instrument entitled Acknowledgment of Debt
and Proposed Manner of Payments. It was approved by the president of
UP, which stipulated the following:
3. In the event that the payments called for are not sufficient to
liquidate the foregoing indebtedness, the balance outstanding after the
said payments have been applied shall be paid by the debtor in full no
later than June 30, 1965.
5. In the event that the debtor fails to comply with any of its promises,
the Debtor agrees without reservation that Creditor shall have the right
to consider the Logging Agreement rescinded, without the necessity of
any judicial suit
ALUMCO continued its logging operations, but again incurred an unpaid
account. On July 19,1965, UP informed ALUMCO that it had, as of that
date, considered rescinded and of no further legal effect the logging
agreement, and that UP had already taken steps to have another
concessionaire take over the logging operation. ALUMCO filed a petition
to enjoin UP from conducting the bidding. The lower court ruled in
favor of ALUMCO, hence, this appeal.

ISSUE:
Can petitioner UP treat its contract with ALUMCO rescinded, and may
disregard the same before any judicial pronouncement to that effect?

RULING:
Yes. In the first place, UP and ALUMCO had expressly stipulated that
upon default by the debtor, UP has the right and the power to consider
the Logging Agreement of December 2, 1960 as rescinded without the

necessity of any judicial suit. As to such special stipulation and in

connection with Article 1191 of the Civil Code, the Supreme Court,
stated in Froilan vs. Pan Oriental Shipping Co:
There is nothing in the law that prohibits the parties from entering
into agreement that violation of the terms of the contract would cause
cancellation thereof, even without court intervention. In other words, it
is not always necessary for the injured party to resort to court for
rescission of the contract.

SOLIDBANK CORPORATION V. MINDANAO FERROALLOY

CORPORATION
GR 153535, JULY 28, 2005
FACTS:
Mindanao Ferroalloy corporation is the fruit of a joint venture
agreement between a Filipino corporation and Korean Corporation. In
its operations, its liabilities ballooned over its assets that it had
to secure loans from petitioner Solidbank. The loans were later
consolidated and restructured, evidenced by a promissory note. The
promissory note was signed by Cu and Hong, both officers of the
corporation. The corporation, through the same officers also
executed a deed of assignment. Thereafter, the corporation
stopped its operations and the loan was left unpaid. The bank
was prompted to file a complaint against the corporation, and
with it, impleading the officers who signed the agreement and
promissory notes. The trial court held in favor of the bank but didn't
adjudge liability of the officers. Both the trial court and CA held that
there was no solidary liability on the part of the officers impleaded by
the bank.
HELD:
Though Hong and Cu signed above the maker/borrower and the
printed name of the corporation, without the word by preceding their
signatures, the fact that they signed in their personal capacities is

negated by the facts that name and address of the corporation

also appeared on the space
provided for in the maker/borrower and their signatures only
appeared once when it should be twice if indeed it was in their
personal capacities. Further, they didn't sign on the portion
allocated for the co-maker, and there was also indicia of it being
signed as authorized representatives.

Vda. De Mistica vs. Naguiat

418 SCRA 73
Art. 1182. Potestative Condition
Issue/Scope
Potestative Condition under Art. 1182 in relation to Art. 1191 of Civil
Code
Facts
Predecessor-in-interest of Petitioner and herein Defendants entered
into a contract to sell in which the latter prayed the initial payment and
undertake to pay the remaining by installment within 10 years subject
to 12% interest per annum
Petitioner filed a complaint for rescission alleging failure and refusal of
Defendants to pay the balance constitutes a violation of the contract
which entitles her to rescind the same
Petitioner argues that period for performance of obligation cannot be
extended to 10 years because to do so would convert the obligation to
purely potestative
Held
Under Art. 1191 of Civil Code, the right to rescind an obligation is
predicated on violation between parties brought about by breach of
faith by one of them. Rescission, however, is allowed only when the
breach is substantial and fundamental to the fulfillment of the
obligation

In this case, no substantial breach in the Kasulatan, it was stipulated

that payment could be made even after 10 years from execution of
contract, provided they will pay the 12% interest
Civil Code prohibits purely potestative, suspensive, conditional
obligation that depend on the whims of the debtor. Nowhere in the
deed that payment of purchase price is dependent whether
respondents want to pay it or not, the fact that they already made
partial payment shows that parties intended to be bound by the
Kasulatan

Romulo Coronel vs Court of Appeals , Conception Alcaraz

FACTS:
This case is about a sale of land in Roosevelt Avenue, Quezon City by
the vendor Romulo Coronel to the vendees Conception Alcaraz and her
daughter Ramona Patricia Alcaraz with the following conditions:
The Coronels will immediately transfer the certificate of title in their
name upon receipt of the down payment which is 50,000.
Upon the transfer in their names of the subject property, the Coronels
will execute the deed of absolute sale in favor of Ramona and then
Ramona shall immediately pay the Coronels the whole balance of
1,190,000.
On January 15, 1985, Conception paid the down payment of 50,000
and then on February 6, 1985, the property was now registered under
the name of Coronels. By Feb. 18, 1985, the Coronels sold the
property to Catalina B. Mabanag for 1,580,000 after she made a
300,000 down payment. This is the reason why the Coronels
cancelled and rescind the contract with the Alcaraz by depositing back

the 50,000 to Ramonas bank account.

On Feb. 22, Conception filed a complaint for specific performance
against the Coronels. On April, the Coronels executed a deed of
absolute sale over the subject property to Catalina after which on June
Catalina was issued a new title over the subject property.
ISSUE:
Whether or not the Receipt of Down payment embodied a perfected
contract of sale or just a mere contract to sell?
HELD:
CONTRACT OF SALE- contracting parties obligates himself to transfer
the ownership and to deliver a determinate thing and the other to pay
a price certain in money or its equivalent.
CONTRACT TO SELL- the prospective seller explicitly reserves the
transfer of the title to the prospective buyer, meaning the seller does
not yet agree or consent to transfer the ownership of the property until
the happening of a contingent event like full payment of price.
SUPREME COURT RULING:
When the Receipt of Down Payment document was
prepared and signed by Romulo Coronel, the parties had agreed to a
conditional contract of sale the consummation of the contract is
subject only to the successful transfer of the certificate of Title.
According to Supreme Court, the receipt of down payment document
manifests a clear intent of the Coronels to transfer the title to the
buyer, but since the title is still in the name effect the transfer even
though the buyers are able and willing to immediately pay the
purchase price. The agreement as well could not have been a contract
to sell because the seller or the Coronels made no express reservation
of ownership or the title of the land.
On Feb. 6, 1985, the Contract of Sale between the Coronels and the
Alcaraz became obligatory.